When evaluating a gas station, I came across an interesting situation that perfectly illustrates why buyers need to dig deeper than the income statement. https://youtu.be/PNGKaRg9uWU
Here’s what happened:
⛽ Two ways gas stations work with fuel:
Buy and resell the fuel (you own it).
Dispense the oil company’s fuel for a commission (per liter/gallon).
In this case, the owner had accepted money from the oil company to replace tanks and pumps. Instead of recording that advance as a loan, the repayment was buried in the operating results:
They earned just 1¢ per liter, while the industry standard was 2.5–3¢ per liter.
Why? Because the oil company was deducting repayment from their commission.
On paper, the business looked weak.
In reality, once repayment ended, profits would rise dramatically.
👉 The accounting problem:
They should have:
Recorded full commissions as income
Shown the oil company’s advance as a loan on the balance sheet
But because it was buried, the business looked like it was underperforming.
💡 Key Takeaways for Buyers
Learn industry benchmarks (margins, cost structures, typical commissions).
Watch for off-balance sheet obligations — they distort performance.
Misstatements aren’t always bad news. Sometimes they hide upside.
This gas station wasn’t struggling — it was on the verge of becoming more profitable once the “hidden loan” was repaid.
📚 Want to go deeper?
Check out my program: businessbuyeradvantage.com — a course on how to properly analyze and buy small businesses.
Don’t forget to join my email list for early access to my latest videos and insights at DavidCBarnettList.com . You’ll even receive 7 FREE gifts when you sign up.
– David C. Barnett
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